XML 40 R20.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events
12 Months Ended
Dec. 31, 2011
Subsequent Events

Note 13: Subsequent Events

 

Convertible Notes and Warrants

 

From January through March 2012, the Company sold $1,894,737 of 5% Original Issue Discount Unsecured Convertible Debentures (the “Notes”) to accredited investors for aggregate consideration of $1,800,000. The Notes mature in six months, carry a fixed conversion price of $0.0573 per share, an annual interest rate of 20% and are convertible into 33,066,961 shares of common stock at maturity. The Company received net cash proceeds of approximately $1,478,000 after payment of fees and expenses of approximately $322,000. In addition, the Company issued the holders of the Notes (the “Holders”) five-year warrants to purchase 16,533,480 additional shares of common stock and Agent warrants to purchase 3,306,696 shares of common stock all at an exercise price of $0.0745 per share. The fair value of the Agent warrants, as determined using the Black-Scholes option-pricing model, was approximately $225,000. The embedded conversion feature of the Notes and the terms of the detachable warrants provide for an effective rate of conversion that was below market value at issuance. Such an element is characterized as a Beneficial Conversion Feature (“BCF”). Pursuant to accounting standards, the estimated aggregate fair values of the BCF and the Holders’ warrants were determined to be approximately $1,800,000 which will be recorded as a debt discount and then amortized as interest expense over the life of the relevant instrument.

 

On March 15, 2012, the Company agreed to attempt to raise an additional $500,000 in aggregate consideration of Convertible Debentures from accredited investors on terms exactly the same as described in the $1,800,000 Note transaction above.

 

Stock Options

 

In February 2012, the Board approved the issuance of a stock option to purchase 500,000 shares of common stock to a new international employee. The exercise price of the option was $0.09 and the option vests 25% after 12 months and 1/36 of the remaining grant amount each month for the remaining three years.

 

Subsequent events have been evaluated through the date financial statements are filed with the Securities and Exchange Commission.